Mr SHORTEN (Assistant Treasurer and Minister for Financial Services and Superannuation) (10:34 AM)
—in reply—Firstly, I would like to thank all those members who contributed to this debate. Schedule 1 of the Tax Laws Amendment (2010 Measures No. 5) Bill 2010 is particularly welcome in the days after the Academy Awards in Los Angeles because it increases access to film tax offsets. These changes reduce the minimum threshold for the post-digital and visual effects offset and simplify eligibility requirements for the location offset. This measure is also expected to increase employment opportunities and to assist in building capacity and expertise in our local film industry, which will in turn provide benefits for domestic productions. The Gillard government is committed to assisting the film industry to attract offshore productions to Australia and to expand opportunities for Australian providers to bid for international work. We do, of course, recognise and congratulate the 10 Australians who were nominated for Academy Awards and the four of our fellow citizens who in fact won an Oscar this week. Their work and their great talent make us all very proud.

The change to the location offset in the tax laws amendment bill will also reduce compliance costs for affected taxpayers. This schedule gives effect to the government’s 2010-11 budget announcement. Schedule 2 adjusts the benchmark interest rate used in the taxation of capital protected borrowing provisions to the Reserve Bank of Australia’s indicator lending rate for the standard variable housing loan plus 100 basis points for capital protected borrowings entered into, amended or extended after 7.30 pm Australian eastern standard time on 13 May 2008. The new benchmark interest rate provides a more appropriate basis for apportioning the expense and capital protected borrowings between interest on a borrowing that does not reflect the payment for the capital protection on the one hand and the costs of capital protection on the other. The costs of capital protection will not be treated as interest for tax deductibility purposes. The new benchmark rate takes into account industry concerns over the credit risk borne by lenders for the costs of capital protection that is paid on a deferred basis.

This schedule also provides for transitional arrangements for capital protected borrowings entered into or extended at or before 7.30 pm Australian eastern standard time on 13 May 2008 from 30 June 2013. It allows capital protected borrowings entered into on or before 13 May to apply the existing benchmark interest rate until 30 June 2013 or the life of the product, whichever is earlier. The amendments are expected to save $170 million over the forward estimates period and are another demonstration of the government’s commitment to ensure that our tax system is as fair and efficient as possible.

Schedule 3 extends the main residence capital gains tax exemption to cover a capital gains tax event that is a compulsory acquisition or other involuntary realisation. The extended exemption will apply where part of a main residence is compulsorily acquired without the dwelling itself being compulsorily acquired. This ensures that there will be no CGT implications for taxpayers if part of their adjacent land is compulsorily acquired without the dwelling also being compulsorily acquired.

Schedule 4 of the bill allows superannuation funds and retirement savings account providers to deduct the cost of providing terminal medical condition benefits to members and account holders. On 16 February 2008 the superannuation law was amended to allow superannuation funds and retirement savings account providers to provide benefits if the member was expected to pass away due to a terminal medical condition in 12 months. However, from that time an anomaly has existed in the law. While superannuation funds and retirement savings account providers have been able to deduct the cost of providing benefits relating to permanent incapacity and the payment of death benefits, they have not been able to claim a deduction for the cost of providing terminal medical condition benefits. This amendment rectifies that anomaly and will provide consistent tax treatment for similar insurance arrangements. Schedule 4 also makes some minor amendments to reflect the drafting convention that someone should be referred to by the term ‘individual’ rather than the term ‘person’.

Schedule 5 of the bill confirms the Commissioner of Taxation’s interpretation of the GST law in allowing non-profit subentities to access the GST concessions available to their parent entity. As part of these amendments, non-profit subentities will be allowed to access the higher registration turnover threshold of $150,000 for non-profit bodies. This measure takes effect from the start of the first tax period after royal assent.

Schedule 6 simplifies how business activity statement liabilities can be offset. It ensures that the Commissioner of Taxation need not apply a payment, credit or running balance account surplus against a tax debt on a business activity statement unless the tax debt needs to be paid. This measure will reduce unnecessary complexity and ease the costs of complying with our taxation laws.

Finally, schedule 7 provides for the expansion of the education tax refund so that school uniforms are included as eligible expenses, along with existing eligible expenses like laptops, home computers, school textbooks, stationery and tools of trade. The refund will be available for school uniform expenses purchased from 1 July 2011, with the first refunds paid in the 2012-13 financial year. The education tax refund will help an estimated 1.3 million Australian families who experience the pressure of back-to-school costs. The refund allows eligible families to claim 50 per cent of their eligible education expenses, up to a maximum refund of $794 for high school children and $397 for primary school children, on back-to-school items. Extending the education tax refund to include school uniforms, along with the childcare rebate and Paid Parental Leave demonstrates the Gillard government’s commitment to reducing cost-of-living pressures on Australian families.

As I believe I have outlined, this Tax Laws Amendment (2010 Measures No. 5) Bill 2010, as presented, deserves the support of the parliament. I commend this bill to the House.